Lebanon Utilities PILOT

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Overview

The City of Lebanon chose to accept the maximum allowed Payments in Lieu of Taxes (PILOT) from our Lebanon Utilities when the following Resolution No. 2010-07 was adopted by our Lebanon City Council (and approved by then Lebanon Mayor Huck Lewis) on December 13, 2010: In accordance with Indiana Code 8-1.5-3-8(g), the Common Council of the City of Lebanon (“City”) hereby elects to transfer to the City’s General Fund, a payment in lieu of taxes from the rates and charges of Lebanon Utilities in an amount sufficient to compensate the City for taxes that would be due the City on the property owned by Lebanon Utility as if the property were privately owned.

The pertinent Indiana Code section reads as follows:
IC 8-1.5 ARTICLE 1.5. MUNICIPAL UTILITIES
IC 8-1.5-3 Chapter 3. Operation of Municipally Owned Utilities Generally
IC 8-1.5-3-8 Rates and charges
    (g) Except for a municipally owned utility taxed under IC 6-1.1-8-3, the commission shall approve rates and charges sufficient to compensate the municipality for taxes that would be due the municipality on the utility property were it privately owned. These rates and charges in lieu of taxes may be transferred to the municipal general fund, if the legislative body so elects.

Our Lebanon Utilities must compute each year the property tax that it would pay to the City if it were privately owned, AND this amount must be included in the expenses that are covered by the utility rates used to compute the month bill paid by all Lebanon Utility customers. In other words, Lebanon Utilities ratepayers must pay the property tax equivalent PILOT as part of of their monthly bill.

The current PILOT payments just add to the City’s General Fund cash balance because the City does not dedicate any of these payments to meet the City’s ongoing needs.

Our Lebanon City Council (with the approval of our Mayor) has the option whether or not to require the PILOT payments for any one year to be transferred to the City’s General Fund. If the City declines to accept the PILOT payments, then the PILOT amounts would become a revenue source - without utility rate increases - to meet the capital project needs of our wastewater, electric, water, and telecommunications departments.

The spreadsheet below details the history of Lebanon Utilities PILOT payments made to the City's General Fund going back to 2001. Significant increases in the PILOT payments began in 2011 because the City chose through Resolution No. 2010-07 to require the maximum payments allowed by state law. Some factors pertinent to these significant PILOT increases include the following:
(a) from 2001 through 2005 our Lebanon Utilities loaned $580,418.66 to the City for the up front costs on the new Municipal Building;
(b) the City was to re-pay our Lebanon Utilities loan over a period of five years starting in 2006;
(c) the City made three equal loan payments of $25,000 each in 2008, 2010, and 2011 leaving a loan balance of $505,418.66;
(d) the City adopted Resolution No. 2010-07 to increase our Lebanon Utilities PILOT payments beginning in 2011 to the maximum allowed by state law;
(e) the PILOT payments increase was applied to our Lebanon Utilities loan from 2011 through February 2014 taking the loan balance to zero.

PILOT Public Policy Improvement: Lebanon Utilities Service Board Resolution 2019-02

Resolution 2019-02 was passed unanimously by your Lebanon Utilities Service Board (LUSB) on June 5 and recommends that the City revise its Resolution 2010-07 as follows:
In accordance with Indiana Code § 8-1. 5-3-8(g), the Common Council of the City of Lebanon ("City") hereby elects to transfer to the City's General Fund, a payment in lieu of taxes from the rates and charges of Lebanon Utilities in an amount up to the taxes that would be due the City on the property owned by Lebanon Utilities as if the property were privately owned. The amount of PILOT collected from the Utility will be reviewed and determined by the City on an annual basis, after presentation from the Utility during the City's budget work sessions which shall include projected capital improvement projects to the Utility infrastructure.

This recommended revision to the City’s Resolution 2010-07 would change the City’s decision-making process regarding Lebanon Utilities PILOT payments as listed next.

1. Our Lebanon City Council, with the approval of our Lebanon Mayor, would have the option to decide each year whether the City needs to have any PILOT payments transferred to the City’s General Fund from our Lebanon Utilities. The City could accept on a yearly basis either (a) the maximum permissible PILOT payments, (b) no PILOT payments whatsoever, or (c) any amount less than the maximum permissible PILOT payments. Currently the City is required to accept the maximum permissible PILOT payments allowed by state law from our Lebanon Utilities every year.

2. Lebanon Utilities would present its planned utility infrastructure capital improvements to our City Council, Mayor, and Clerk-Treasurer during the City’s budget work sessions each year.

3. Our City Council, with the approval of our Mayor, would decide each year whether or not to accept any PILOT payments from out Lebanon Utilities.

4. The PILOT payments not accepted by the City would be deposited in PILOT Reserve Funds established by our Lebanon Utilities.

5. The Lebanon Utilities PILOT Reserve Funds would all be spent on the planned utility infrastructure capital improvements so that the balance in each Reserve Fund would be zero by the end of the year.

If the City were to change its Resolution No. 2010-07 so that the PILOT payments made by our Lebanon Utilities to the City could be reduced or eliminated, then the PILOT amounts retained by our Lebanon Utilities would be spent on the capital project needs of our wastewater, electric, water, and telecommunications departments – while avoiding utility rate increases that would unnecessarily harm too many of our vulnerable neighbors. The current $558,368 in PILOT payments from our Lebanon Utilities are not now needed to subsidize our City government because the able management of our elected officials, together with recent increases in existing taxes and the imposition of new taxes, have provided ample revenues to meet our City’s needs.

Lebanon Utilities Wastewater PILOT Impact

Current Lebanon Utilities budget projections indicate that Wastewater is our only utility department where a rate increase might be needed prior to December 2022.

Our Wastewater Utility projected end-of-year cash balances are as follows:
2019 = $2,784,403
2020 = $1,963,066
2021 = $1,636,309
2022 = $1,150,076
2023 = ($239,008)
2024 = ($1,017,669)
Projected capital expenditures would have to be decreased by $1,256,677 to avoid negative cash balances in 2023 and 2024. What this probably means is that the planned 2023 replacement of the Indianapolis Avenue lift station could not be accomplished.

The 2019 Lebanon Utilities budget includes the following LU PILOT payments to the City’s General Fund:
$214,531 from the Wastewater Utility
$180,337 from the Electric Utility
$145,625 from the Water Utility
$ 2,433 from the Telecommunications Utility
$542,926 TOTAL from Lebanon Utilities

If $214,531 in Wastewater Utility PILOT payments were eliminated starting in 2020, our Wastewater Utility projected end-of-year cash balances would improve as follows:
2019 = $2,784,403
2020 = $2,177,597 (versus $1,963,066 if the PILOT is not eliminated)
2021 = $2,065,371 (versus $1,636,309 if the PILOT is not eliminated)
2022 = $1,793,669 (versus $1,150,076 if the PILOT is not eliminated)
2023 = $619,116 (versus a negative $239,008 if the PILOT is not eliminated)
2024 = $54,986 (versus a negative $1,017,669 if the PILOT is not eliminated)
All our needed Wastewater capital projects through 2024 could be completed without a rate increase!

Eliminating the Wastewater Utility PILOT payments would benefit our Lebanon Utilities Ratepayers (who are also our City Taxpayers) by providing the funds necessary to complete our needed Wastewater capital projects through 2024 without a rate increase.

City Cash Balances Maintained Without PILOT Payments

By City Council Resolution 2010-07, our City has chosen since 2011 to deposit the maximum allowed PILOT payments from our Lebanon Utilities into the City’s General Fund.

The following spreadsheet shows that during the past seven years our City’s General Fund cash balance has increased more than 213 percent (our City’s population has grown less than 3 percent from 15,732 to 16,200):

The following spreadsheet details how during the past seven years that the PILOT payments from our Lebanon Utilities to our City’s General Fund have totaled $3,244,976:

During the past seven years, our City’s General Fund cash balance increased $3,742,951 (from $1,755,694 to $5,498,645). Our City’s General Fund cash balance increase was almost half a million dollars more than the total seven-year PILOT payments of $3,244,976 received from our Lebanon Utilities. It is evident that our City’s ample revenues can maintain sufficient cash balances in all our local City funds WITHOUT any PILOT payments from our Lebanon Utilities.

Also, according to the Annual Financial Report data from the Indiana Gateway website, the City’s General Fund cash balance from 12/31/2010 to 12/31/2018 increased $3,960,760 (or 258 percent from $1,537,885 to $5,498,645). It is informative to note that the City’s 2011-2018 General Fund cash balance increased $395,772 WITHOUT the PILOT payments. Also, the 2011-2018 cash balance increases in the City’s other governmental activities funds totaled $10,021,602. It is clear that Lebanon City Council Members, Lebanon Mayors, and the Lebanon Clerk-Treasurer have so successfully managed the City’s finances that supplemental PILOT payments from our Lebanon Utilities are not currently needed.

Using our City’s ample revenues to eliminate the PILOT payments would benefit our Lebanon Utilities Ratepayers (who are also our City Taxpayers) by helping provide the funds necessary to complete our needed utility capital projects without utility rate increases.

PILOT Payments NOT Needed To Pay For City Services

By City Council Resolution 2010-07, our City has chosen since 2011 to deposit the maximum allowed PILOT payments from our Lebanon Utilities into the City’s General Fund. This public policy might make sense IF our City needed the PILOT revenues to pay for the City services provided to our Lebanon Utilities.

The following spreadsheet shows that during the past seven years our City’s various tax receipts have increased significantly more than our City’s population growth of less than 3 percent (from 15,732 to 16,200 citizens):

Our hefty highway, road, and street local revenue increases are largely the result of ongoing per-gallon gasoline, special fuel, and motor carrier surcharge tax hikes that were first imposed by the state in 2017.

Large local income tax increases include the new Local Income Tax For Public Safety.

There have also been significant revenue increases from both the existing Property Tax and Food And Beverage Tax.

This is the bottom line: PILOT payments from our Lebanon Utilities are no longer needed to subsidize our City government because recent increases in existing taxes, along with the imposition of new taxes, have provided ample revenues to pay for the City services provided to our Lebanon Utilities. Every PILOT dollar paid by Lebanon Utility Ratepayers (who are the same persons paying the new and increased taxes) should stay with our Lebanon Utilities for reinvestment in our utilities infrastructure.

Lebanon Utilities Rate Increases Impact

Eliminating or limiting the PILOT payments made by our Lebanon Utilities to our City’s General Fund would benefit our Lebanon Utilities Ratepayers (who are also our City Taxpayers) by providing more money for needed utility capital projects without utility rate increases. Our Ratepayers will have more discretionary income if our City Council avoids utility rate increases by eliminating or limiting the PILOT payments.

Some of our Ratepayers will have more money to save for emergencies, college education, and retirement if utility rate increases are avoided. Sadly, too many of our neighbors need to have our City Council avoid unnecessary utility rate increases so they can continue to buy enough food, afford needed medicines, clothe their children, and pay the rent.

Listed next are some facts regarding how unnecessary utility rate increases would harmfully impact many of our Lebanon neighbors who are already struggling with low incomes and food insecurity.

Low Income Households. “Real Life. Real Choices. – Understanding and Supporting Youth and Families in Poverty” was an April 24, 2019, workshop sponsored by the Indiana Youth Institute and conducted at Lebanon High School by two representatives from the United Way of Central Indiana. Detailed information about the economic condition of our local households was provided from the United Way ALICE Project: see https://www.iuw.org/alice. ALICE is an acronym for Asset Limited Income Constrained Employed. Although persons in ALICE households are employed and have incomes above the Federal Poverty Level, the incomes are not enough to keep an unexpected bill from forcing them to make tough choices such as deciding between quality child care, enough nutritious food, good health care, safe transportation, or paying the rent. Some pertinent data about our local ALICE households with two adults, one infant, and one preschooler include the following:
(a) the 2016 Boone County ALICE household survival budget (that covers the cost of basic household expenses without savings, a smartphone, and basic home internet) was $59,304 ($29.65 hourly wage);
(b) the Central Indiana Federal Poverty Level income is $24,300 per year;
(c) 45% of the total 6,964 Lebanon households in 2016 had incomes below the ALICE survival level or the Federal Poverty Level;
(d) 65% of the jobs in Central Indiana pay less than a $20 hourly wage;
(e) public and private assistance provide support to many households earning below or slightly above the Federal Poverty Level, but less support is provided to ALICE households whose income is above Federal Poverty eligibility levels.

Child Food Insecurity. “Understanding the Impact of Child Food Insecurity” was the topic of a February 27, 2019, meeting at the Lebanon Public Library that was sponsored by the Indiana Youth Institute (along with other community partners). Detailed Boone County information was provided by two local Purdue Extension presenters. One important resource was the 2019 Indiana KIDS COUNT Data Book: see https://s3.amazonaws.com/iyi-website/data-book/2019+Data+book+/2019_IYI_Databook_022619.pdf. The USDA defines food insecurity as a state in which “consistent access to adequate food is limited by a lack of money and other resources at times during the year.” Some pertinent local child food insecurity data include the following:
(a) more than 1 in 6 Hoosier children (17.7%) are food insecure;
(b) child food insecurity in Boone County is 12.9%;
(c) in Lebanon, 40.8% of the school children received free or reduced price meals during the 2018-19 school year;
(d) in Indiana, 29% of food insecure Hoosier children are likely ineligible for the federal Supplemental Nutrition Assistance Program (SNAP), Women, Infants, and Children (WIC), and National School Lunch Program (NSLP);
(e) in Indiana the past year, 16.1% of households with children younger than 18 received monthly SNAP benefits that averaged $118 per individual;
(f) according to the National Survey of Children’s Health, in the past year 10.6% of Hoosier families with children received monthly WIC benefits that averaged $32.72 per household;
(g) food insecure children are more likely to have repeated a grade than food secure children;
(h) the local Shalom Summer Program provided 22,000 meals to 4,500 children in 2018.

Senior Citizen Food Insecurity. Beginning January 2019, Gleaners Food Bank (in partnership with The Caring Center) brings a mobile food pantry to Lebanon’s National Guard Armory the third Tuesday of every month. This mobile food pantry is open to Boone County senior citizens age 55 and older. If you go to the National Guard Armory on the third Tuesday of any month, you can tell that Lebanon has a problem with senior citizen food insecurity by observing the multitude of our senior neighbors at the mobile food pantry.

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This page was last updated on 12/14/23.